Former U.S. Senator, New Jersey governor, and Goldman Sachs boss Jon Corzine's week is not getting any better after the Monday collapse of MF Global, the commodities and derivatives trading firm he's been running since losing to Chris Christie. It now appears that hundreds of millions of dollars of customers' money are missing, prompting the FBI and the SEC to look into whether or not something illegal was going on at Corzine's "mini-Goldman." Of the ramped up investigation, one credit analyst said, "I think it will add to the complexity of the situation and will add to more skeletons." And Corzine himself is taking most of the blame.
The company's bankruptcy stemmed mostly from big investments in European bonds, which Corzine said last week were not exceptionally risky, but were likely complicated by a demand for collateral from antsy lenders. As Felix Salmon of Reuters tells it in a detailed explanation, "MF Global, leveraged to the eyeballs, didn’t have that kind of extra money lying around."
By all accounts, Corzine was making the decisions:
His insistence on taking more risks, including buying the debt of European countries like Italy and Spain, along with a contract that would have provided him with an additional $12.1 million if he left the firm, paint a picture of excess.
Just over a week ago, Corzine reportedly gave "a spectacular speech" to a collection of bankers and traders and gave "no sense at all that there was impending doom." The next day, the company posted a huge quarterly loss, sending stocks plummeting and triggering what would soon become the biggest Wall Street failure since Lehman Brothers. But maybe there was some indication: At the speech's steak dinner, Bloomberg reports, Corzine "excused himself before the main course was served."
FBI Reportedly Investigates MF Global, Jon Corzine's Future Uncertain [ABC News]
In Corzine Comeback, Big Risks and Steep Fall [DealBook/NYT]
What happened at MF Global [Felix Salmon/Reuters]
Corzine Steak Dinner Speech Gave No Hint of ‘Doom’ [Bloomberg]